King: We face a long wait for signs of convincing recovery

The immediate prospects for Britain’s economy are grimmer than in any previous forecast and output is unlikely to revert to pre-crisis levels before 2011, the Bank of England said in a stern warning yesterday.

Presenting the Bank’s quarterly Inflation Report, the Governor, Mervyn King, was at pains to stress that, while the economy might soon return to modest growth, that was not necessarily a cause for ‘bunting and celebration’.

The fall in GDP of about six per cent had been severe and the ‘prolonged period of balance-sheet adjustment’ now beginning would hold back growth, Mr King said, adding that output was ‘unlikely, at least for a considerable period, to return to a level consistent with a continuation of its pre-crisis trend’.

The economy, he said, had ‘only just started on the road to recovery’ and the Bank believed that inflation was ‘on balance more likely to be below the target than above it for most of the forecast period, though by the end the risks are broadly balanced’.